Russian government starts cutting off gas supply to Netherlands after refusing to pay rubles

Gazprom will stop gas supplies to part of the Netherlands’ state-owned energy company GasTerra on Tuesday after Russia refused to pay in rubles following Russia’s invasion of Ukraine, the Dutch company said.

Meanwhile, Danish energy company Orsted warned on Monday that Russia could cut gas supplies to Denmark for the same reason, but eased concerns by saying gas could still be secured through European markets.

Moscow has asked customers from “unfriendly countries”, including EU member states, to pay for gas in rubles, as a way to circumvent the West’s financial measures against its central bank over Vladimir Putin’s Feb. 24 offensive. Sanctions.

The news came as gas prices skyrocketed across Europe and sparked fears that continued supply curbs by the Kremlin could continue the trend.

Energy prices in Europe have hit record highs this year after Russia, Europe’s top gas supplier, invaded Ukraine, with European leaders so far ruling out price caps.

Elsewhere, EU leaders gathered in Brussels hoping to persuade Hungarian Prime Minister Viktor Orban to accept a watered-down oil embargo on Russia as part of a sixth set of sanctions imposed by Budapest on Moscow.

Hungary, which imports 65% of its oil consumption from Russia through the Druzhba pipeline, is seeking an exemption from the import ban.

EU member states have proposed to “temporarily” exclude the Druzhba pipeline from the embargo, imposing sanctions only on oil shipped to the EU via tankers. Orban called it a “great solution” but sought to further secure his country’s energy supply.

Gazprom will stop gas supplies to part of the Netherlands’ state-owned energy company GasTerra on Tuesday after Russia refused to pay in rubles following Russia’s invasion of Ukraine, the Dutch company said.Pictured: Gazprom’s building on Moscow Street in St. Petersburg

The Dutch company said in a statement on Monday that GasTerra Netherlands had “decided not to comply with Gazprom’s unilateral payment request” as it would violate EU sanctions and create “financial and operational risks”.

“In response to this decision by GasTerra, Gazprom has announced that it will cease supply from May 31, 2022,” the company said.

GasTerra said the Russian energy giant’s move meant it would not supply 2 billion cubic meters of gas to the Netherlands between now and October, adding that it “already predicted this by buying gas elsewhere.

“GasTerra has repeatedly urged Gazprom to respect the contractually agreed payment structure and delivery obligations, but unfortunately to no avail,” it said.

The Dutch government directly owns 10 percent of GasTerra and holds another 40 percent through state-owned gas company EBN. The rest is owned by energy giants Shell and Esso.

The Dutch government said it “understands” GasTerra’s decision.

Climate and Energy Minister Rob Jetten tweeted: “This decision has no impact on gas supplies to Dutch households.”

The Netherlands is the latest in a string of European countries to be hit by cuts in Russian gas production.

On May 21, after energy group Gasum also refused to pay in rubles, Russia halted supplies to neighboring Finland, which has angered Moscow for seeking to join NATO.

A month ago, Russian supplies in Poland and Bulgaria were cut.

The government says the Dutch depend on Russia for about 15 percent of their gas supply, or about 6 billion cubic meters a year.

This is below the EU average of 40%, but like other European countries, the Netherlands is working to reduce its reliance on Russian energy.

Prime Minister Mark Rutte of the Netherlands is in Brussels for an EU summit as leaders struggle to agree on a Russian oil embargo, insisting that there is no energy security problem in the Netherlands.

“I don’t think there is a big problem with energy security in the Netherlands, and of course we are all trying to make sure our energy supply remains stable,” he told reporters.

In response to the energy crisis, the Dutch government has delayed the closure of a huge gas field in the northern province of Groningen, which has been repeatedly hit by earthquakes due to the extraction of natural gas.

Dutch Prime Minister Mark Rutte arrives for the first day of the European Council's Special European Summit on Ukraine in Brussels, Belgium, May 30, 2022

Dutch Prime Minister Mark Rutte arrives for the first day of the European Council’s Special European Summit on Ukraine in Brussels, Belgium, May 30, 2022

On Monday, Danish energy company Orsted warned that Denmark could be the next country to see Russian gas supplies cut off.

Orsted, formerly DONG Energy, insists it will continue to pay for Russian gas shipments in euros, with a payment deadline of May 31.

‘Gazprom Export continues to ask Orsted to pay for gas supplies in rubles. Under the contract, we are not legally obligated to do so, and we have informed Gazprom Export several times that we will not do so,” the company said in a statement.

“Therefore, it is possible that Gazprom Export will stop the supply of gas to Orsted. In Orsted’s view, this would be a breach of contract,” it added.

The company said Russia cannot directly cut off gas supplies to Denmark because there is no direct pipeline between the two countries.

This means the country should still be able to secure gas supplies by buying it from the European market.

Orsted said it was filling up its storage facilities in Denmark and Germany to secure gas supplies to customers.

In April, the Danish government announced plans to phase out Russian gas, including moving half of the 400,000 households heated by natural gas to district heating networks or electric heat pumps by 2028.

Natural gas accounts for 18% of Denmark’s annual energy consumption. Domestically produced gas accounted for three-quarters of gas consumption in 2019, with Russia being the main source of imported gas, according to the Danish Energy Agency.

Moscow has asked customers from “unfriendly countries”, including EU member states, to pay for gas in rubles, a way of circumventing Western financial sanctions on its central bank in the February 24 offensive

European leaders, who meet at EU summits in Brussels on Monday and Tuesday, will not decide on a cap on gas prices, but may authorize the commission to study the issue, the European Commissioner for the Economy said.

Paolo Gentiloni told reporters at the Foreign Correspondents Association in Rome that if member states agreed to this, the committee would move swiftly to analyse the possibility, adding that it would be difficult to assess the possibility of a decision. time to make any predictions.

Gentiloni said it would be an important step if the European Council approves the European Commission’s mechanism for studying price caps.

Italy has proposed EU member states cap the price of gas imports from Russia to help reduce inflation in the bloc, but other countries have questioned the validity of the idea.

EU leaders gathered in Brussels will try to agree on sanctions on Russian oil imports to avoid showing disunity over the bloc’s response to the war in Ukraine.

Under a new draft of the summit’s conclusions, the leaders of the 27 nations should agree that their next round of sanctions will cover oil and temporarily exempt pipelines of crude, a compromise the ambassadors failed to reach on Sunday.

The potentially revised text, seen by Reuters, would confirm an agreement on seaborne oil sanctions, with pipeline oil supplying to landlocked Hungary, Slovakia and the Czech Republic being subject to sanctions at some point.

EU leaders gathered in Brussels on Monday, hoping to persuade Hungarian Prime Minister Viktor Orbán (in Brussels on Monday) to accept a watered-down oil embargo on Russia as part of a sixth set of sanctions imposed by Budapest against Moscow.

EU leaders gathered in Brussels on Monday, hoping to persuade Hungarian Prime Minister Viktor Orbán (in Brussels on Monday) to accept a watered-down oil embargo on Russia as part of a sixth set of sanctions imposed by Budapest against Moscow.

Meanwhile, Russia is considering paying Eurobondholders by applying the mechanism it uses to process gas payments in rubles, although investors say the move will not save Russia from a historic debt default.

The plan would allow Moscow to pay bondholders while bypassing Western payment infrastructure, according to the Kremlin and Russia’s finance minister.

A few days ago, Washington decided not to extend a license that allows U.S. creditors to collect bond payments while enabling Russia to avoid default.

The move by the U.S. Treasury brings Russia one step closer to defaulting on its hard currency debt. Foreign euro bondholders are now awaiting two coupon payments due last week with a 30-day grace period.

Russia said it had the cash and was willing to pay, refusing to talk about a default. Finance Minister Anton Siluanov said on Monday that Moscow will continue to pay its foreign debt in rubles.

But he told Vedomosti newspaper that if foreign euro bondholders receive payments in foreign currency in accordance with Russia’s obligations, they must open ruble and hard currency accounts with Russian banks.